ADVANTAGES AND DISADVANTAGES OF ICS TO THE AUDITOR
ICS will reduce the amount of audit work to be done in so far as the auditor will be able to use systems based audits to apply tests which will facilitate his audit work.
- A strong ICS will minimise chances of errors and frauds, and the introduction of inter-checking supervision and improved custody will in turn minimise liabilities to third parties, who would have depended on his opinion with greater surety and speed.
- Will reduce the amount of audit evidence to be gathered, because it will facilitate reaching and using a greater variety of audit evidence available within the business. This will enable him to form an opinion with greater surety and speed.
- The presence of an internal check system strengthens the credibility of audit evidence gathered.
- ICS minimises the work load and the time need to take in order to produce his report.
- The preparation of an ICS will identify those areas prone to errors and frauds, which will enable the auditor to plan his audit work so that he allocates more time and effort to those areas where for organisational reasons the internal check system is weakest.
- ICS emphasises the use of control accounts thus assuring the auditor of up to date account reconciliation information which will facilitate his examinations.
- ICS enables him reduce the sample size to be tested and thus facilitate his ability to carry out as many varied audit checks as possible.
- ICS can only be strong normally with support of a strong internal audit function which in turn enables the auditor to use internal auditor’s work to facilitate his work.
- A strong ICS boosts accountability which depends on clearly segregated and defined duties and responsibilities and this will enable the auditor to know who to contact in case of difficulties.
- It also helps him to give quality advice to management; this in turn may minimise his work load in future audits.
- ICS enables the auditor to have greater knowledge of his client’s business and facilitates the drawing up of a balanced audit opinion.
Disadvantages of ICS to the Auditor
- The management may over rely on the strength of the ICS and therefore relax their supervision which may leave room for errors and frauds thus exposing the auditor to potential civil liabilities.
- The presence of ICS may lead to the auditor reducing the volume of examination carried out which may lead to smaller samples of data thus leaving other areas to possibilities of errors and frauds which may expose him to civil liabilities.
- It may be frustrated by management through collusion and manipulation which may mislead the auditor’s opinion leading to biased reports.
- The presence of ICS is supposed to minimise the auditor’s volume of tests but not his liabilities which means that its strength may leave some errors and frauds undetected due to relaxed tests. This will increase his liabilities. ICS may be manipulated so that errors and frauds by the management cannot be easily detected and this may lead to a biased opinion.
- ICS may reduce the auditor’s vigilance and observations with an unfavourable effect on the quality of the audit.
- ICS may be abused by the internal auditors through collusion with the management and this may lead to the external auditor being mislead.